**5. Benefits and risks**

The crowdfunding provides various indirect and non-financial benefits, too. First of all, it allows to understand if the entrepreneurial, social or cultural idea can be appreciated and shared by third parties. In fact, if the crowd is pushed to contribute in the first phase of the project, this means that the market will be well inclined to support it even later. Access to the crowd, which includes subjects with specific skills, is useful for obtaining professional feedback at low cost, too.

Furthermore, if it is evident that the project is supported on a large scale and the risk associated with the possible use of capital reduced, there will be greater chances that informal banks or investors (angel investors) will grant loans additional on better terms.

The crowdfunding can be used as a powerful marketing tool: it puts the attention of investors and potential customers on an innovative project even before it is implemented or concluded. Usually, the entrepreneur, or more generally the proposer, should start a campaign aimed to publicize the new service or product as best as possible, in order to reach a certain level of market interest in conjunction with the launch. In this way, it is possible to focus the attention of consumers in a completely innovative way, whose main purpose is to raise capital.

However, crowdfunding is not easy to implement, as it requires a long and thorough preparatory process in order to minimize the risks that may negatively affect the borrower and investors.

First of all, it is necessary to consider the hypothesis in which the objective is not fully achieved. In the case of the "all-or-nothing" model, failure to reach the set amount obliges the proposer to return the amount collected up to that point. For this reason, it is advisable to analyze the market and design an excellent strategy to ensure a high resonance of the project. If the platform allows it, the "keep-it-all" model is more secure.

Another widespread problem concerns the underestimation of costs, which could vary in itinere, as for example in the case of equity crowdfunding: following new share issues, in fact, there are additional administrative costs often not to be considered in the business plan.

A similar case concerns the information flow; before, during and after the fundraising phase, there must be a subject who carefully follows each step and, if the promoter does not have competence in the matter, the assignment to third parties could lead to costs not underestimate. The problem arises from the beginning when in the most complex forms of collection, such as social lending and equity crowdfunding, it is important to establish clauses that provide rights and obligations for both parties.

With regards to this, it is necessary to analyze thoroughly the concrete implications deriving from the recognition of significant rights to investors, and to avoid granting these rights with the sole purpose of making the proposal more attractive. Indeed, the failure to comply with the clauses would lead potential investors to lose confidence in the project. Therefore, it is important to consider also the complaints, which must be managed in the best possible way in order to prevent unpleasant situations from generating much more serious repercussions.

Furthermore, the fact that at the moment a national law on crowdfunding has not yet been enacted, which may be able to specifically regulate the various possible cases, raises the risk that the participants may inadvertently implement unlawful behavior. For this reason, it is advisable to carefully and meticulously refer to all the legislative texts issued to date both on the national and community territory.

The investors can lose interest in the project at any moment, without giving any notice, too. Specifically, in the case of donation or reward crowdfunding, the cessation of the interest manifests itself with the blocking of any future forms of financing; on the contrary, in the equity crowdfunding, the investors sell their share to other subjects interested. For this reason, it is important to be ready right away to up and down funding flows and to sudden changes in the social structure [19].

There are other types of risks on online projects, together with those of a financial and legal nature, for example, the possibility that the project is not successful. In this case, the promoter has a reputation damage because the promoter does not turn to a credit institution, but a heterogeneous plurality of people. For this reason, the failure to achieve the goals will be seen as a real public failure.

Moreover, even the possibility that the borrower fails to fulfill the promises made within the established terms, despite the successful collection of funds, is a risk. On the contrary, the timeliness and the perfect correspondence between when planned and when realized will allow the promoter to improve his reputation [2].

Finally, there is the risk of turning to fraudulent platforms or those unable to protect the rights of participants. In fact, the proponent exposes an innovative idea online, which becomes public knowledge. For this reason, the manager should develop a system of protection aimed at avoiding plagiarism [19].

### **6. Case study: crowdfunding on Produzioni dal Basso Italian platform**

In Italy, there are several crowdfunding platforms currently active (**Table 1**). Among these, Produzioni dal Basso is the oldest. Founded in 2005, it allows those who want and need to get funds for a business projects, to publish their idea

**229**

*Crowdfunding: The Case of Italy*

*DOI: http://dx.doi.org/10.5772/intechopen.90940*

**Platform name Crowdfunding** 

Com-Unity Reward&Donation-

Donordonee Reward&Donation-

Greenfunding Reward&Donation-

based

based

based

**typology**

**Note**

campaigns.

books.

money to the winner.

3 days of the request.

secure counterpart.

development of new ideas.

investment methods proposed by the markets.

BoomContest, which gives an additional sum of

It aims to create synergies and collaborations for the

SMEs seeking funds. It is listed on the Italian Stock

It elects 6 members a day, allowing them to realize

itself the goal of financing start-ups and creating an

allows the investor to become a supporter of all the

expenses and to help countries in a state of

It finances green-economy projects.

under the Creative Commons License.

1 Caffè Donation-based It is a non-profit association that supports solidarity

Actionworld Equity-based It is aimed at investors who are attentive to the new

BookaBook Reward-based It is dedicated to the publication of unpublished

Borsa del Credito Lending-based It is a marketplace-lending that credits funds within

Clubdealonline.com Equity-based It allows SMEs and investors to find a controlled and

CrowdFundMe Equity-based It is based on connecting investors with start-ups and

Distribuzioni Dal Basso Reward-based It supports the circulation of cultural works released

Doorway Equity-based It is founded by four business angels, and it has set

Ecomill Equity-based It is dedicated to high-level social sustainability

Eppela Reward-based It is dedicated to any type of project (art, cinema,

Funditaly Donation-based It is based on the 'cooperative' crowdfunding, and it

GoFundMe Ibrida It supports campaigns directed to support medical

For Italy Reward-based It aims to preserve the Italian cultural heritage.

Giffoni Innovation Hub Reward-based It is dedicated to cultural-artistic start-ups. Gigfarm Reward-based It finances artists and promoters, helping them to

Fundera Equity-based It is dedicated to the cleantech sector.

Crowndarts Reward-based Events and shows are funded at national and

De Rev Reward-based It is dedicated to innovative start-ups.

Exchange

their ideas.

campaigns.

technology, etc.).

projects on the platform.

make concerts.

emergency.

offline private market.

European level.

BacktoWork24 Equity-based It finances small businesses and start-ups. Be Crowdy Reward-based It regards cultural and artistic projects. Blender.loans Lending-based It aims to reduce the cost of debt.

BoomStarter Reward-based It gives the possibility to participate in the

BuonaCausa Ibrida It promotes socially based ideas.

Concrete Equity-based It is dedicated to real estate projects.

## *Crowdfunding: The Case of Italy DOI: http://dx.doi.org/10.5772/intechopen.90940*

*Banking and Finance*

model is more secure.

both parties.

considered in the business plan.

amount obliges the proposer to return the amount collected up to that point. For this reason, it is advisable to analyze the market and design an excellent strategy to ensure a high resonance of the project. If the platform allows it, the "keep-it-all"

Another widespread problem concerns the underestimation of costs, which could vary in itinere, as for example in the case of equity crowdfunding: following new share issues, in fact, there are additional administrative costs often not to be

A similar case concerns the information flow; before, during and after the fundraising phase, there must be a subject who carefully follows each step and, if the promoter does not have competence in the matter, the assignment to third parties could lead to costs not underestimate. The problem arises from the beginning when in the most complex forms of collection, such as social lending and equity crowdfunding, it is important to establish clauses that provide rights and obligations for

With regards to this, it is necessary to analyze thoroughly the concrete implications deriving from the recognition of significant rights to investors, and to avoid granting these rights with the sole purpose of making the proposal more attractive. Indeed, the failure to comply with the clauses would lead potential investors to lose confidence in the project. Therefore, it is important to consider also the complaints, which must be managed in the best possible way in order to prevent unpleasant

Furthermore, the fact that at the moment a national law on crowdfunding has not yet been enacted, which may be able to specifically regulate the various possible cases, raises the risk that the participants may inadvertently implement unlawful behavior. For this reason, it is advisable to carefully and meticulously refer to all the

There are other types of risks on online projects, together with those of a financial and legal nature, for example, the possibility that the project is not successful. In this case, the promoter has a reputation damage because the promoter does not turn to a credit institution, but a heterogeneous plurality of people. For this reason,

Moreover, even the possibility that the borrower fails to fulfill the promises made within the established terms, despite the successful collection of funds, is a risk. On the contrary, the timeliness and the perfect correspondence between when planned and when realized will allow the promoter to improve his reputation [2]. Finally, there is the risk of turning to fraudulent platforms or those unable to protect the rights of participants. In fact, the proponent exposes an innovative idea online, which becomes public knowledge. For this reason, the manager should

**6. Case study: crowdfunding on Produzioni dal Basso Italian platform**

In Italy, there are several crowdfunding platforms currently active (**Table 1**). Among these, Produzioni dal Basso is the oldest. Founded in 2005, it allows those who want and need to get funds for a business projects, to publish their idea

legislative texts issued to date both on the national and community territory. The investors can lose interest in the project at any moment, without giving any notice, too. Specifically, in the case of donation or reward crowdfunding, the cessation of the interest manifests itself with the blocking of any future forms of financing; on the contrary, in the equity crowdfunding, the investors sell their share to other subjects interested. For this reason, it is important to be ready right away to up and down funding flows and to sudden changes in the social structure [19].

situations from generating much more serious repercussions.

the failure to achieve the goals will be seen as a real public failure.

develop a system of protection aimed at avoiding plagiarism [19].

**228**



**231**

*Crowdfunding: The Case of Italy*

*DOI: http://dx.doi.org/10.5772/intechopen.90940*

launch of innovative products on the market.

obtain a more effective sponsorship.

required to indicate only the timing.

ing of 5% by the site are planned.

tion of the idea.

on the dedicated website. In accordance with the provisions of national and EU regulations, it is possible to include cultural and social projects, or relating to the

ing access to credit and financial inclusion of people who are unbanked.

Over the last decade, the platform has contributed to the creation of more than 2600 projects, allowing their promoters to raise over 6 million euros. The affirmation of the platform, especially on the Italian market was also supported by the partnership with several institutions and companies, including Banca Etica, a bank specialized in the field of ethical and sustainable finance, with the aim of facilitat-

The collaboration between Banca Etica and Produzioni dal Basso platform consists mainly in the publication of periodic tenders, to which the holders of ideas conforming to the indications of the call (e.g., tenders for the financing of female entrepreneurial projects) can participate to obtain, together with the funds collected through the platform, funds provided by the bank to achieve specific collection targets. Depending on the area of reference, it is possible to select other partners of significant importance such as Arci, Fastweb4School, Infinity, Telethon Foundation and ENPA, which give greater prestige to one's idea. In this way, it is possible to

The Produzioni dal Basso portal provides four different ways to raise funds. The first mode is called "collect all" and can be used for any type of project, regardless of nature and objectives. It reports the same characteristics of the "keep-it-all" combined with the methods provided by the reward-based crowdfunding. At the time of entering the project, the proposer will have to provide one or more types of reward to be sent to the lender when the funds are mobilized. In relation with the offered service, Produzioni dal Basso holds a 5% fee on the money collected, to which are added the costs related to the chosen payment method, indicated later. In order to access the "collect all" mode, information is needed regarding the timing, that is, the persistence of the project on the platform (max 365 days), and the indication of the budget necessary for the realiza-

The second mode is the so-called "simple donation," comparable to the donation-based crowdfunding. This type is used particularly for altruistic projects and is directed toward lenders motivated by the desire to contribute to the realization of an idea that can improve collective well-being or of particular categories, without getting any kind of reward in return. In this case, Produzioni dal Basso provides a 3% deduction on the amount collected. In the "simple donation," the author is

In the "recurring donation," the third collection method, the lender undertakes to contribute periodically to the realization of the project, renewing the financing automatically, usually every 30 days. In this case, the fee is 3% and is calculated on each transaction, while the forecast of the reward is at the discretion of the borrower. In the "recurring donation," the indication of timing is not necessary. "All or nothing" is the last expected mode, perfectly adherent to the "all- or- nothing" model described previously. The borrower receives the funding collected only if the target has been reached by term established (maximum 120 days). Also in this case, the sending of a reward and a simultaneous withhold-

Finally, fundraising on Produzioni dal Basso uses two payment methods: PayPal and LemonWay. In the case of PayPal, there is a 3.4% commission on the donated amount and a tax of 0.35 euro, which the payment system automatically holds for each transaction. In the case of the use of the payment institution LemonWay, for each transaction, there is a fee equal to 0.8% (increased by 0.15 euro in the case of bank transfer) or a deduction of 0.6% (increased by 0.15 euro if the loan is made by credit card) [21].

#### **Table 1.** *Principal crowdfunding platforms currently active in Italy.*

#### *Crowdfunding: The Case of Italy DOI: http://dx.doi.org/10.5772/intechopen.90940*

*Banking and Finance*

**Platform name Crowdfunding** 

**typology**

**Note**

SMEs

gastronomy.

returns for employers.

and energy projects.

intermediation and without particular access

related to the nautical world (naval engineering, protection of the marine environment, fish, etc.).

the employers to assume the role of donor and/or

It has funded more than 24,000 projects.

telecommunications sector (TIM), and it raises funds for environmental, social and innovative

individuals.

requirements.

for social lending in the EU.

with a high rate of innovation.

improving ideas and projects.

media, e-commerce, app, etc.).

Investi-Re Equity-based It is a platform dedicated to innovative start-ups/

Kendoo Reward-based It is dedicated to digital projects (websites, social

Land2Land Reward-based It is dedicated to projects related to agriculture and

Meridonare Donation-based It supports cultural and social projects for Southern Italy.

Motusquo.it Lending-based It offers lower interest rates for borrowers and higher

Muum Lab Equity-based It promotes fundraising for agro-industry, real estate

Prestiamoci Lending-based It offers personal loans online from private

Produzioni dal Basso Ibrida It promotes self-produced projects, without

Sea-Crowd Ibrida It supports campaigns for the realization of ideas

Smartika Lending-based It is one of the first 10 platforms identified by Forbes

Starsup Equity-based It favors the collection of risk capital for start-ups

Terzo Valore Ibrida It is part of the Intesa Sanpaolo group, and it allows

Ulule Reward-based It is born in France, and it is also very active in Italy.

Universitiamo Donation-based It collects funding for university scientific research. Werealize Reward-based It finances projects related to the world of design. WithYouWeDo Reward-based It is created by Italian company leader in

WoopFood Reward-based It finances projects directed to enhance Italian food

creditor.

projects.

excellence.

directly by the fans.

Starteed Reward-based It also offers the possibility of crowdcreation,

The Funding Spirit Reward-based It is dedicated to sportive and cultural projects. Triboom Reward-based It is dedicated to sports projects, substantiated

ShinyNote Donation-based It is direct to promote solidarity campaigns.

Schoolraising Reward-based It raises funds for school projects.

Sport Supporter Reward-based It is dedicated to sports campaigns.

Let us donation Donation-based Its slogan is "Profit supports No-Profit."

Microcreditartistique Reward-based It is specialized in contemporary art.

**230**

**Table 1.**

*Source: own processing.*

*Principal crowdfunding platforms currently active in Italy.*

on the dedicated website. In accordance with the provisions of national and EU regulations, it is possible to include cultural and social projects, or relating to the launch of innovative products on the market.

Over the last decade, the platform has contributed to the creation of more than 2600 projects, allowing their promoters to raise over 6 million euros. The affirmation of the platform, especially on the Italian market was also supported by the partnership with several institutions and companies, including Banca Etica, a bank specialized in the field of ethical and sustainable finance, with the aim of facilitating access to credit and financial inclusion of people who are unbanked.

The collaboration between Banca Etica and Produzioni dal Basso platform consists mainly in the publication of periodic tenders, to which the holders of ideas conforming to the indications of the call (e.g., tenders for the financing of female entrepreneurial projects) can participate to obtain, together with the funds collected through the platform, funds provided by the bank to achieve specific collection targets.

Depending on the area of reference, it is possible to select other partners of significant importance such as Arci, Fastweb4School, Infinity, Telethon Foundation and ENPA, which give greater prestige to one's idea. In this way, it is possible to obtain a more effective sponsorship.

The Produzioni dal Basso portal provides four different ways to raise funds.

The first mode is called "collect all" and can be used for any type of project, regardless of nature and objectives. It reports the same characteristics of the "keep-it-all" combined with the methods provided by the reward-based crowdfunding. At the time of entering the project, the proposer will have to provide one or more types of reward to be sent to the lender when the funds are mobilized. In relation with the offered service, Produzioni dal Basso holds a 5% fee on the money collected, to which are added the costs related to the chosen payment method, indicated later. In order to access the "collect all" mode, information is needed regarding the timing, that is, the persistence of the project on the platform (max 365 days), and the indication of the budget necessary for the realization of the idea.

The second mode is the so-called "simple donation," comparable to the donation-based crowdfunding. This type is used particularly for altruistic projects and is directed toward lenders motivated by the desire to contribute to the realization of an idea that can improve collective well-being or of particular categories, without getting any kind of reward in return. In this case, Produzioni dal Basso provides a 3% deduction on the amount collected. In the "simple donation," the author is required to indicate only the timing.

In the "recurring donation," the third collection method, the lender undertakes to contribute periodically to the realization of the project, renewing the financing automatically, usually every 30 days. In this case, the fee is 3% and is calculated on each transaction, while the forecast of the reward is at the discretion of the borrower. In the "recurring donation," the indication of timing is not necessary.

"All or nothing" is the last expected mode, perfectly adherent to the "all- or- nothing" model described previously. The borrower receives the funding collected only if the target has been reached by term established (maximum 120 days). Also in this case, the sending of a reward and a simultaneous withholding of 5% by the site are planned.

Finally, fundraising on Produzioni dal Basso uses two payment methods: PayPal and LemonWay. In the case of PayPal, there is a 3.4% commission on the donated amount and a tax of 0.35 euro, which the payment system automatically holds for each transaction. In the case of the use of the payment institution LemonWay, for each transaction, there is a fee equal to 0.8% (increased by 0.15 euro in the case of bank transfer) or a deduction of 0.6% (increased by 0.15 euro if the loan is made by credit card) [21].
